TMI Blog2009 (3) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... venue for Assessment Years 1981-82 and 1985-86. 2. In case of the Reference, wherein the assessee is the applicant, Tribunal has referred the following two questions: (i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the commission was received by the assessee company in assessment year 1985-86? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee had sold the scrap outside the books of account and in estimating the same at Rs.3,00,000/-? 3. The assessee, a Company, in which public are substantially interested, filed its income of return originally on 28.6.1985, which was revised upward as per revised return of income filed on 30.09.1981. The Assessing Officer has recorded in Paragraph No. 4.2 of the assessment order dated 13.3.1989 that on receipt of certain information from the Department of Revenue, Ministry of Finance, Government of India, New Delhi vide letter No. F.No.504/5/87-FTD dated 4.3.1987 it came to knowledge that the assessee Company had received a sum of US dollars 47,242 on 16.4.1985 as agent commission from a Japanese Company nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the Appeal. The assessee therefore carried the matter in second appeal before the Tribunal and the Tribunal upheld that findings recorded by the Commissioner (Appeals) as recorded in impugned order dated 13.10.1999. 8. In so far as the second issue regarding sale of scrap outside books, generated during the course of manufacturing activities, is concerned, the Assessing Officer made an addition to the tune of Rs. 61,74,512/- comprised of a sum of Rs.30,87,256/- shown as sale of scrap in books of accounts of the Company and further addition of the balance amount. The assessee carried the matter in appeal in relation to the further addition, namely the amount of Rs.30,87,256/-, which was added on application of provisions of Section 145(2) of the Act. Commissioner (Appeals) granted partial relief by holding that there was no basis for making addition to the tune of Rs.30,87,256/- towards estimated sale of scrap as the admission made by Shri R.N. Amin would not bind the company because Shri Amin was not a Managing Director at relevant point of time when such admission was made. However, Commissioner (Appeals) was of the opinion that the state of record maintained by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri R.P. Jadeja, who was under control of Shri Amin. Reliance was placed on letter dated 1.4.1985, stated to be a copy of the communication from Shri R.P. Jadeja to the Japanese Corporation as appearing at Annexure-17 (Page No.151). Reliance was also placed on letter dated 16.5.1987 addressed by Shri R.N.Amin to the Chairman of the Company where Shri Amin had owned up having retained the funds. Attention was also invited to the minutes of the meeting of the Board, which took place on 15.6.1967, to point out that the Board itself had come to the conclusion that retention of funds by Shri R.N. Amin with him personally, was unwise and imprudent. Thereafter, learned advocate pointed out a copy of the declaration made under the Scheme of Voluntary Declaration of foreign currency assets etc. to contend that such a declaration was made by Shri Amin in his personal capacity and said documents categorically reveal that the amounts had been retained by Shri Amin, either in the account of Shri Jadeja or younger brother of Shri Amin at Singapore or in U.S.A, and therefore, the assessee Company was nowhere in picture nor did the assessee company have any knowledge about such funds being retaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere pressed into service : (i) Mrs. Hirabai D. Desai sons Vs. The Commissioner of Income Tax, Bombay , reported in (1936) 4 ITR 95 (Bom); (ii) Pandit Bros. Vs. Commissioner of Income-tax, Delhi , reported in (1954) 26 ITR 159 (Punjab); (iii) Bombay Cycle Stores Co. Ltd. Vs. Commissioner of Income-tax, Madhya Pradesh and Bhandara, Nagpur , reported in (1958) 33 ITR 13 (Bom); (iv) R.B. Bansilal Abirchand Spinning and Weaving Mills Vs. Commissioner of Income-tax, Poona , reported in (1970) 75 ITR 260 (Bom); (v) International Forest Co. Vs. Commissioner of Income-tax, Patiala , reported in (1975) 101 ITR 721 (J K); (vi) Malani Ramjivan Jagannath Vs. Assistant Commissioner of Income-tax, reported in (2007) 207 CTR (Raj.)19. 13. On behalf of Revenue, learned counsel placed reliance on the communication dated 16.5.1987 (Annexure-18) to submit that Shri Amin had accepted that he was Managing Director of the company, he had entered into commission agent agreements with foreign concerns on behalf of the Company and he had received the funds on behalf of the Company. That mere retention of the funds by Shri Amin would not abso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile passing the impugned order. The order has to be read as a whole and inadvertent errors of description cannot vitiate the order. In this context, it is necessary to note that the assessee had moved the Tribunal by way of Miscellaneous Application No. 53/Ahd/1999 filed on 20.7.1988 seeking rectification of apparent error appearing in the impugned order dated 13.3.1988, but the said application did not raise the issue of the Tribunal having committed any apparent error on this count. 17. On merits, if one examines the documents on which reliance has been placed, and which were before the Tribunal, it becomes apparent that Shri R.N. Amin has accepted, not only in his statement recorded on oath, but even in his communication addressed to the Board of Directors that in his capacity as a Managing Director, he was entitled to enter into the agreements with both, Indian and foreign Companies on behalf of the Company and no separate resolution for this purpose was necessary (Question and Answer number 13 of the statement dated 9.3.1989). In response to Question No. 14 as to whether agreements were binding on the Company, Shri Amin categorically replied in affirmative stating that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Amin and/or Shri Jadeja were carrying on any business individually on their own, namely, independent of the business of assessee Company. The payments being under the agreements with foreign companies, receipt of the payment having been acknowledged by authorized person of the assessee Company, it is not possible to accept the contention that the assessee Company was not in receipt of any amount. It is also necessary to note that there is no evidence on record to suggest that despite the transactions having taken place during the accounting period namely 1.3.1983 to 30.6.1984, the assessee Company took any steps to recover the so called outstanding commission amount. The inaction on the part of the Company to realize the commission, after services having been rendered by the Company, which fact is not denied by the Company, itself indicates that the Company was in knowledge of the fact that the amount of commission had already been received by its authorized agent. 20.In light of the aforesaid evidence on record, it is not possible to accept the submission that the Tribunal has committed any error while holding that the commission amount was taxable in hands of the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel appearing on behalf of the respondent was not in a position to dispute the fact that the amount in question had been expended on publication and distribution of the literature giving details of the goods manufactured and offered for sale in the market as recorded by the Tribunal. 26.Hence applying the ratio of the aforesaid judgment of this High Court, the aforesaid question at the instance of the revenue is answered in the affirmative i.e. in favour of the assessee and against the revenue. 27. In Reference Application No. 103/Ahd/1998, following question has been referred by the Tribunal at the instance of revenue : "Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the payment for consultation services amounted to Rs.2,00,000/- to sister concern as allowable." 28. In relation to this issue, the Tribunal has recorded in Paragraph No. 19.1 of the impugned order that the factory in question was not a new unit but the expenditure had been incurred for expansion of the existing project and was thus revenue in nature. This fact could not be disputed by learned advocate for the revenue. 29. In the circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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